Where might the digital economy drive the demand for U.S. office space in 2016?
To get an idea, we looked at three reports:
- The Urban Land Institute’s and PWC’s report, “Emerging Trends in Real Estate: United States and Canada 2016,” which is targeted at real estate investors (you’ll probably notice the numbers aren’t sequential; that’s because there were ties, and also cities we left out because they didn’t rank elsewhere).
- The top metropolitan areas for venture capital investments, as reported in “The Rise of the Global Startup City,” from the Martin Prosperity Institute at the Rotman School of Management at the University of Toronto (Exhibit 9: Top 20 Metros in North America by Venture Capital Investment).
- And for an extra layer of intrigue, The Kaufman Index’s 2015 ranking of cities with the most startup activity.
1. New York City
CRE: 1 & 19
VC $: 3
The ULI-PWC report actually separates NYC-Brooklyn, which ranks number 1, and NYC-Manhattan, which is way at the bottom. But this is no surprise; space is New York is always at a premium, and with more startups calling it home, demand will continue to grow.
2. Minneapolis-St. Paul
VC $: 17
This area has a lot going for it, according the ULI-PWC report: It’s a strong area for health and education, with plenty of STEM opportunities. This is the up-and-comer that’s still a bit under the radar, with low enough rents that making ambitious ventures possible. The funding and entrepreneurship levels might not be there yet, but startups might also find it easier to raise funds here.
VC $: 10
Austin’s been a hot digital economy center for a while—it was a less expensive city with a very vibrant urban lifestyle. That’s attracted developers and companies that are looking for more bang for their buck. Companies are also looking at cities that have affordable cost of living for the younger generations of employees they want to attract, and Austin fit that bill (for how long, however, is another story).
4. Los Angeles
VC $: 4
Los Angeles is sitting in a sweet spot at the moment—there’s a high level of entrepreneurship activity and investment money but the rents aren’t at the San Jose/San Francisco levels. There are jobs, and the city has seen something of a renaissance as a popular coastal city. And with the entertainment industry, there are already plenty of creatives there looking for the next opportunity.
VC $: 2
Boston, as the area boasting some of the country’s best universities, has long been the home of many startups. But it hasn’t been the city that’s grown startups to Uber levels. That could soon change: General Electric is moving to Boston from Fairfield, CT. According to a press release, GE is looking to “reposition itself as a source of innovation” and selected Boston for its “business ecosystem, talent, long-term costs, quality of life for employees, connections with the world, and proximity to other important company assets.” Will there be a trickle-down effect?
6. San Diego
VC $: 6
San Diego is another city that’s moving up the pack because of its quality of life and less-expensive office spaces. With a strength in life sciences companies, the city is seen increasing investment over the past few years, including Sapphire Energy and Effector Therapeutics.
7. Dallas-Forth Worth
VC $: 13
ULI-PWC talks about this area as providing high quality of life, thus making it attractive to enterprises looking for less expensive space. The state boasts many big F500 companies, but startups might have problems getting capital. However, there are plenty of resources, private and public, being invested in local entrepreneurship.
(Somewhat) Honorable mention: Portland, OR
Portland, Oregon, is one of ULI-PWC “gateway” cities, and “markets to watch.” It ranked at number 3 on its office properties ranking. However, it didn’t rank in the global cities report, and the Kaufman startup index puts it at 26, down from 24, with startup density decreasing over the past few years.
Want more future-focused business insight for the coming year? See 10 New Developments To Anticipate In 2016.